Show Me the Money – Proposed Rule Changes Take on the Spiraling Costs of Discovery

In 2013, suggested changes to discovery rules on both sides of the Atlantic highlight the increasing concerns shared by Americans and their British neighbors over litigation costs, as well as each region’s unique attempts to address them. Predictably, the proposed revisions are steeped in debate and all about cost control.

Show Me the Money

The United States and Great Britain have more than just an impressive number of Olympic medals in common; both have spent recent years grappling with unreasonably high – and in some areas, increasing – litigation costs. Both acknowledge the need for change, citing nearly identical civil procedure objectives providing for the just, speedy and cost-effective adjudication of disputes. (See Fed. R. Civ. P. 1, CPR 1.1 and CPR PD 31B). Both appointed parties to analyze the current state of discovery practice and propose rule revisions to address findings. Both passed landmark amendments in the past, and both now seek a more direct path to efficiencies that didn’t materialize with previous revisions.

Following a year-long analysis by Lord Justice Jackson of litigation costs and a subsequent 500-page report, the UK’s Civil Procedure Rule Committee recently approved an amendment to the Civil Procedure Rules (CPR 31.5A) requiring parties to file and exchange detailed litigation budgets at the outset of each case. The new rule also permits the court to impose a cost management order, consisting of the budgetary agreements between the parties or, if necessary, the court’s approval of budget revisions where no agreement exists. Together with additional cost reforms, this new “menu” of budget assessment options will take effect April 1st of 2013 and will work in conjunction with the existing disclosure requirements of Practice Direction (PD) 31B.

Less imminent are the changes gaining traction with the US Federal Judicial Advisory Committee in regard to preservation and spoliation. Like our European neighbors, the debate centers on cost: in American terms, the added cost of preservation and review in an age of ever-increasing data stores, not to mention the cost of uncertainty (over-preserving out of an abundance of caution) versus the risk of sanctions (for under-preserving or allowing spoliation of relevant data).

Oddly absent from the 2006 amendments to the Federal Rules of Civil Procedure (FRCP), preservation practices today are largely derived from Judge Shira Scheindlin’s seminal Zubulake V decision (Zubulake v. UBS Warburg, 229 F.R.D. 422 (S.D.N.Y. 2004)). The proposed revisions, if implemented, would likely outline more specific guidelines on when the duty to preserve begins and how the process might be tailored to minimize costs.

The “P” Word

According to the Brits, “p” stands for proportionality – an effort to codify a reasonable balance between the cost of litigation and the value of any given case. The UK rules intentionally avoid specific percentages, preferring instead to weigh factors not unlike those applied by Judge Scheindlin’s cost shifting analysis: the conduct of the parties, the value of the claim, the relative importance of the matter to all parties, and the complexity or novelty of the issues at stake. But like the US, Britain’s civil procedure rules don’t specifically define proportionality, leaving counsel to seek guidance from UK case law – in the form of Lownds v. Home Office. Lownds outlines a 2-part test to determine the proportionality of litigation costs. If a party’s costs seem proportionate to the value of the case as a whole, the party simply needs to demonstrate that each of its expenses was reasonably incurred and reasonably priced. If the costs initially seem disproportionate, on the other hand, the court will impose the higher burden of assessing whether each expense was necessary as well as being reasonably priced.

The proposed amendments stemming from Lord Justice Jackson’s report include clarification of the Lownds test with a new definition of proportionality. The new definition would deem costs proportionate “if they bear a reasonable relationship to: (a) the sums in issue to the proceedings; (b) the value of any non-monetary relief…; (c) the complexity of the litigation; (d) any additional work generated by the conduct of the paying party; and (e) any wider factors…such as reputation or public importance.” (See proposed CPR 44.4(5)).

By contrast, in the US, “p” stands for preservation. The burden of preserving mountains of data – often at a less than ideal cost – hangs in an uncomfortable balance with the risk of not preserving enough. A newly proposed addition to FRCP Rule 37 addresses the latter concern, suggesting a variety of penalties for spoliation (the loss or corruption of potentially relevant data) based on the level of a party’s culpability. Some believe that revising the rules to clarify preservation duties will save litigants money by better defining what data requires preservation and increasing the predictability of costs. Others argue that if organizations followed existing guidelines with more precision and consistency – including the more frequent use of available technologies – savings would follow.

Whether a fan of proportionality or preservation, Brit or American, what may be most useful to all involved are the similarities between each region’s attempt at providing cost management. Proportionality is, after all, just a means to provide litigants with what they need – and only what they need – to ensure fair (affordable) access to the justice system. Preservation rules, conversely, attempt to provide the same unfettered access to justice, balancing parties’ ability to discover what they need against the threat of penalties for denying the other party the same courtesy. But although the two approaches show some convergence in terms of overarching goals and similar factors for determining the reasonable amount and distribution of expenses, they also each maintain a unique emphasis that will undoubtedly effect the success or failure of any proposed revisions. Either way, stay tuned for some significant cost management changes that may just be the defining trend for 2013.

Kate joined AccessData Group as Assistant General Counsel following its recent merger with Summation Litigation Technologies. Prior to AccessData, Kate regularly used litigation software as a practicing attorney in both California and Texas. She received her J.D. from the University of California, Hastings College of the Law and holds a B.A. from the University of Michigan at Ann Arbor.